Long Term Care Insurance is a type of insurance policy designed to safeguard against a prolonged stay in a nursing home and preserve your financial security, dignity, freedom of choice and peace of mind.
Long Term Care Insurance is a way to help fund services such as a nursing home stay, assisted living, home health aide and homemaker services in the event you or a loved one develops a prolonged physical illness, disability or cognitive impairment.
According to the U.S. Department of Health and Human Services, about 60% of Americans over age 65 will need at least some type of long term care service during their lifetime, which could cost upwards of $200 a day, depending on the service.
Let’s break out that number to a full year. To fund long term care services for only one year, the average cost in 2008² was: $76,285 for a private room in a nursing home, $36,096 for an assisted living facility (one-bedroom unit) and $22,464 for home care (home health
aid)3. And contrary to what many people think, these costs are not covered by health insurance plans, Medicare or even Medicaid (unless you've spent down your other assets). This leaves you with some decisions — mainly how are you preparing to fund these services?
The three basic ways to fund long term care services are out of pocket, the government (if you are eligible) or through Long Term Care Insurance. As you can imagine, if you are paying for these services yourself, even just a few years of these costs could significantly drain your retirement savings.
Purchasing a Long Term Care Insurance policy could help mitigate the major expense impact that long term care services may have on your retirement accounts.
Do I need Long Term Care Insurance?
Deciding if you would benefit from a Long Term Care Insurance policy will depend on your age, health status, overall retirement goals, income and assets. It is a complex decision, but could also provide you with significant advantages depending on your situation. Long Term Care Insurance policies may offer some federal income tax advantages¹ and can help you keep as much independence as possible so you don’t have to rely on government aid and/or family members to take care of you. It will also help prevent spending all of your hard earned savings and investments or liquidating your assets to cover long term care expenses.
However, it is important to think through purchasing a Long Term Care Insurance policy and the commitment involved. You need to be sure you can afford the premiums and pay that premium for many years. Before purchasing a Long Term Care Insurance policy, make sure to look closely at your needs and resources available to determine if the benefits outweigh the costs.
You may NOT want to purchase Long Term Care Insurance if:
- You can’t afford the premiums
- Your only source of income is a Social Security benefit or Supplemental Security Income (SSI)
- You often have trouble paying for basic bills and important needs
- You are on Medicaid
You may WANT to consider purchasing Long Term Care Insurance if:
- You have significant assets and income
- You don’t want to use your assets and income to pay for long term care services
- You can pay premiums, including possible premium increases,
without financial difficulty
- You want to stay independent of the support of others
- You want to have the flexibility of choosing care in the setting you prefer or will be most comfortable in (nursing home, assisted living, home health aide or homemaker services)
The SecurePathSM by Transamerica Advantage
SecurePath by Transamerica financial advisors will help you to determine if Long Term Care Insurance is the right option for you. We want to be your financial resource and help protect your hard-earned assets and your quality of life. Contact us for a complimentary consultation.
Sources:
1You should check with your state insurance department or insurance counseling program for information about tax-qualified policies. Check with your tax advisor to find out if the tax advantages make sense for you.
2Paying for Long-Term Care, Cost of Care. National Clearinghouse for Long-Term Care Information available at http://www.longtermcare.gov. Accessed January 2008
3This amount accounts for a person using home care 24 hours per week at a rate of $18/hr.
SecurePath by Transamerica is a service of Transamerica Retirement Management, Inc., a marketing unit of Transamerica Life Insurance Company, Cedar Rapids IA, and Transamerica Financial Life Insurance Company, Purchase NY. Insurance products are offered through InterSecurities Insurance Agency, Inc., a licensed insurance agency in most states. All companies named herein are AEGON companies.
